Debt/Income Ratio
The debt to income ratio is a tool lenders use to calculate how much money can be used for a monthly mortgage payment after all your other monthly debts have been met.
Understanding the qualifying ratio
For the most part, underwriting for conventional mortgages requires a qualifying ratio of 28/36. FHA loans are less strict, requiring a 29/41 ratio.
The first number is the percentage of your gross monthly income that can go toward housing costs. This ratio is figured on your total payment, including homeowners' insurance, homeowners' dues, PMI - everything.
The second number is the maximum percentage of your gross monthly income that should be applied to housing costs and recurring debt together. Recurring debt includes auto loans, child support and credit card payments.
For example:
With a 28/36 ratio
- Gross monthly income of $2,700 x .28 = $756 can be applied to housing
- Gross monthly income of $2,700 x .36 = $972 can be applied to recurring debt plus housing expenses
With a 29/41 (FHA) qualifying ratio
- Gross monthly income of $2,700 x .29 = $783 can be applied to housing
- Gross monthly income of $2,700 x .41 = $1,107 can be applied to recurring debt plus housing expenses
If you'd like to run your own numbers, please use this Mortgage Loan Pre-Qualifying Calculator.
Just Guidelines
Remember these are just guidelines. We'd be thrilled to help you pre-qualify to determine how large a mortgage loan you can afford.
At BeneGroup, Inc., we answer questions about qualifying all the time. Call us: 4083956018.